SBJ/June 28 - July 4, 2004/SBJ In Depth

Delivering the Message

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The market for delivery services is less than a tenth the size of consumer products like autos, soft drinks and beer that dominate sports marketing. Yet delivery services are as critical to GM as steel, as vital to Coke as sugar, and as integral an ingredient as hops in the brewing of Budweiser.

So while the target for DHL, FedEx and the U.S. Postal Service is overwhelmingly business-to-business, the air and truck carriers use a remarkable amount of consumer marketing to reach the shipping decision-makers in American business.

The domestic advertising budgets of FedEx and UPS put them among the top American brands. According to Nielsen Media Research, UPS spent $133 million in measured media last year (around 34 percent went to sports-related media buys), with FedEx (43 percent) at $49 million.

Deutsche Post subsidiary DHL is relaunching in the United States, following its billion-dollar purchase of Airborne, which gave DHL the No. 3 position in the U.S. overnight air market. DHL just launched a blitzkrieg that will see it spend $150 million for the rest of 2004 on advertising and marketing, well in excess of its single-digit U.S. market share.

In sports, FedEx has a league sponsorship with the NTRA, the NFL and the PGA Tour. FedEx has title rights to the Orange Bowl game, the Washington Redskins’ stadium and the arena that the NBA Memphis Grizzlies and the University of Memphis will call home beginning this fall.

When it comes to motorsports, it’s become a bumper-to-bumper race amongst the truckers. UPS puts the majority of its sports marketing resources behind NASCAR. UPS became a league sponsor in 2000, and the following year signed a mid-eight-figure deal to be primary sponsor of Dale Jarrett’s No. 88 Ford. Not to be outdone, FedEx just signed to sponsor a No. 11 Chevrolet from Joe Gibbs Racing starting next season. DHL paid for title sponsorship of the June 20 Nextel Cup race in Michigan.

While the Postal Service is dropping its sponsorship of Lance Armstrong and the U.S. Pro Cycling Team when it expires in December, it recently joined the rush to NASCAR. The USPS has a one-year deal as presenting sponsor of Brewco Motorsports’ Busch Series team and associate sponsor of the team’s No. 27 Kleenex car driven by Johnny Sauter.

Dollars for demos

The target demographic, a 25- to 54-year-old male, is the easiest explanation for the delivery category’s preoccupation with sports marketing. That demographic is most easily reached through sports.

“The best way to hit that demographic in a focused way is through sports media and sponsorship,” said Dick Metzler, who is orchestrating DHL’s brand renaissance as executive vice president of marketing.

“Historically, people in our business have talked about reaching the

UPS highlights its tie to NASCAR driver Dale Jarrett, but print ads play off other sports.
shipping decision-maker,” said Ed Buckley, vice president of brand management and customer communications at UPS. “Now there’s so many people within our customers’ organizations affecting the supply chain — whether it’s finance, IT or transportation — these [traditional consumer marketing] tactics are totally justifiable for our b-to-b target.”

Business-to-business marketers always prize the hospitality component of any sponsorship, and sporting events offer prime hospitality opportunities. Certainly FedEx gets name exposure out of the 27-year, $205 million naming-rights deal it signed for the Washington Redskins’ stadium in 1999, but branding isn’t critical when you already control the country’s most renowned trademarks.

“Don’t underestimate the impact that new taxes or shipping regulations have on FedEx; it could easily be more impactful than the largest customer,” said David Grant, a principal at Velocity Sports & Entertainment, Wilton, Conn., who has worked on the FedEx account for more than a decade. “You’ve got the Department of Transportation, Commerce and Energy in D.C. — all critical to FedEx. And the only thing more important than politics in Washington is the Redskins.”

The essence of sports — speed, teamwork, precision, accuracy, reliability and performance — is well-matched to the traits delivery carriers want to demonstrate to customers. That makes sports a robust platform for marketing and advertising.

FedEx and UPS spend to keep their names top of mind and to spread awareness of their breadth of service offerings. FedEx is best known for its overnight delivery, serviced by planes, but it wants to communicate that it has other offerings, such as freight and ground services. The NFL is one hook it uses to promote FedEx Ground.

UPS’ fleet of brown trucks are as ubiquitous as traffic lights in any American city, but the company also wants to capture some of the speed and performance that are well-established components of the FedEx brand. UPS depends on Dale Jarrett and NASCAR to add that with campaigns like “Will Dale race the truck?”

As shipping becomes more complex, the carriers hope those running supply chains will specify their brands in much the way liquor marketers hope bar patrons will call out their brand by name when they order a drink.

“Shipping used to be left to the company selling products. Now you have quite a few businesses specifying that shipments be sent in particular way,” said DHL’s Metzler. “We’re trying to influence them as well.”

While advertising in the category is still filled with images of trucks and planes, this is no longer a business that can be dominated by whichever company moves cardboard boxes faster from point A to point B.

Now it’s also about getting inside supplier A’s manufacturing and distribution, and synchronizing it with customer B. The sophistication of delivery services and the proliferation of Internet-based inventory ordering, tracking and management, has led the kind of on-demand manufacturing that’s carried companies such as Dell Inc. to the top of their market, largely based on mastery of the supply chain.

“Brown” doesn’t instantly evoke complexity, but internally the company uses terms like at-once manufacturing, inventory management, supply chain solutions, distribution logistics and commerce synchronization. Thus, “What can brown do for you?” is the UPS tag line.

“We’re all operating in a broader space trying to allow customers to manage their own supply chains better,” Buckley said.

That has created some confusion for the uninitiated. “Originally, I was told FedEx wanted exclusivity in the logistics category,” said Mark Donovan, senior vice president of business operations for the Philadelphia Eagles. “Initially, I wasn’t sure whether that meant we could do an IBM deal or not.”

New DHL ad campaign positions the carrier as fresh competition in delivery service.
With its foray into NASCAR and recent conversations with the NBA looking like they might turn into a league sponsorship, FedEx appears to be adopting a strategy of ubiquity across sports. “The brand is well-established,” said Kevin Demsky, managing director, sponsorship marketing for FedEx. “It is more about making FedEx an easy choice by communicating our various shipping choices through sports and advertising.”

FedEx evaluates sponsorships by how well they contribute to five criteria: portraying a leadership position, like the NFL or PGA Tour; contributing to revenue, like its NTRA deal; reaching a particular target, like FedEx Field; sponsorships that support major FedEx hubs, like the AAA Memphis Redbirds, which play in the company’s hometown; or hospitality, where events like the Orange Bowl score high.

Obviously, some sponsorships can contribute to many of these areas. For FedEx, the larger question now is how much is too much? “We’re very close to feeling that enough is enough, but maybe we could do a little bit better in category five [hospitality] across a few more events in summer or early fall,” said Demsky.

Voila! FedEx will race UPS next year in NASCAR’s top circuit.

Does sports fit in the ad mix?

Perhaps because it puts all of it sponsorship eggs in the NASCAR basket, UPS and The Martin Agency have done some memorable advertising with Jarrett, while FedEx rarely integrates its sports properties with creative. A 1999 Super Bowl ad — in which the Detroit Red Wings get a bag of feed delivered to their home arena by Brand X, while Jose Luiz Arena in Bolivia gets the Stanley Cup — is one notable exception.

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“Lately, we haven’t used much sports in their TV, but we have used a bunch in print, particularly the NFL, and we are committed to keeping it an integral part of the marketing mix, since it is an important passion point across America,” said John Osborn, president and CEO of BDDO, New York, which has handled FedEx’s advertising since 1989.

Like FedEx, UPS also leverages its properties through the use of licensed merchandise, ticket incentives and athlete schmoozes for customers and employees. While no one in the category wants to say hospitality is the principal reason for using sports, at a minimum, it is a primary consideration.

“NASCAR provides us a way to get out on the weekend with customers and employees out of the workplace, have some fun together and solidify and nurture relationships,” said Buckley. “From an advertising standpoint, it allows us to add some fun to the brand and show that UPS isn’t always serious.”

While UPS is happily leveraging one principal sports investment with NASCAR and FedEx apparently on a path to be as omnipresent across American sports as any brand this side of Coke or Bud, it will be interesting to see what path DHL takes.

“They don’t own it all yet,” said Metzler, when asked about FedEx’s expanding sports portfolio. He termed DHL’s one-year NASCAR race title agreement a “toe in the water.” Overseas, the courier just signed a global Formula One sponsorship, making it the circuit’s official logistics provider. DHL sponsored the Jordan F1 team until the end of the 2002 season.

Also in DHL’s war chest are sponsorships with the Cincinnati Reds, supporting a major shipping hub in that city, signage in Canadian NHL arenas, and a deal with the Miami Dolphins and Florida Marlins, which has been widely rumored as the first step in an eventual naming-rights deal. DHL Stadium anyone? “We’ve made no decision,” insisted Metzler. “We have an agreement there for signage right now and that’s about as far as it goes.”

If the deal does occur, it will be interesting to see if FedEx attempts to use its title sponsorship of the Orange Bowl to block the deal at Pro Player Stadium.

DHL’s new campaign from Ogilvy & Mather, New York, stresses choice. It casts FedEx and UPS as a cozy duopoly (an 80 percent market share in domestic express delivery) that must now contend with the new kid on the block.

Of the seven DHL ads from Ogilvy & Mather scheduled to air before year’s end, four are sports-related. Whether it’s because of that or pending sponsorship investments or both, Metzler said sports will be a significant part of DHL’s marketing budget this year.

“I don’t want to chew up a disproportionate amount of my budget in sponsor fees until we’ve really dialed up our awareness,” Metzler said. The perfect property? “One where we can make a disproportionate impact. If we’re just getting our logo out there, but not doing anything else to deliver our message, that’s hollow awareness.”

Sports sponsors have long decried the lack of a definitive metric to ascertain their return on investment. Ultimately, that’s what ended the Postal Service’s nine-year association with Lance Armstrong and the U.S. Pro Cycling Team. With scant business in France — where the biggest event in the sport takes place — the Postal Service found it difficult to justify the cost of the high seven-figure-a-year deal. The sponsorship became a whipping boy for government reformers.

One government audit expressed the frustration felt by all corporate sponsorship marketers. “The Postal Service was unable to track or verify revenue associated with sponsorships,” read a report from the USPS Office of the Inspector General.

FedEx plays off its worldwide NFL league partnership, marketing deals with all 32 teams.
USPS’ recent NASCAR entry includes a commitment to carry a World War II Memorial U.S. postage stamp on the hood of the No. 27 car in a Nov. 6 race, and a special one-time paint scheme that will see driver David Green drive a No. 37 USPS car on Sept. 25.

USPS spokesman Bill Brown said NASCAR is a good fit because of fans’ demonstrated loyalty toward sponsors, products and services, and the sport’s broad reach since “our target is nearly everybody.” He said the sponsorship will be evaluated based on business generated by customer entertainment, employee reaction and media mentions.

With e-mail and faxes limiting overnight growth, the latest battleground for FedEx and UPS is at retail. In December FedEx announced its intention to purchase the 1,200-store Kinko’s chain for $2.4 billion. Two years prior, UPS acquired Mail Boxes Etc. and 3,400 of its 3,750 U.S. stores have rebranded as “The UPS Store.” Both FedEx and UPS are hopeful that they can generate more freight business from small to medium-sized businesses, who generally pay top rates. The other play is to persuade companies large and small to outsource their document and computing needs, especially for mobile workers.

Integration of sports marketing with the stores has been sporadic. The Jarrett car had a special UPS Store paint scheme and the stores have sold some die-cast. Folding Kinko’s and the former Mail Boxes Etc. into their parents’ larger sponsorships will take some negotiating, since adding those rights could limit the properties’ ability to cut deals in associate categories such as office suppliers and office equipment.

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